The amount of capital funneled into Research and Development (R&D) by U.S. based tech companies is simply staggering.

Amazon takes the cake with a reportedly $13.3 billion annual spending on R&D—and while big, Amazon is only one company—so aggregate the total amount spent annually and you’re talking GDP of a small European country.

It is a given that R&D for proprietary software means progress, and progress is key to our lives, and certain industries lend themselves to more secure, proprietary software to fit their operational needs i.e. machine learning and artificial intelligence. Let’s take a quick look at Enterprise Resource Planning (ERP), the software systems key to the running of many SME’s.

ERP systems combine business information from multiple divisions of a business into a single software program. Some benefits include better real-time information, reduced redundancy in resource sharing, and a more efficient work environment as a whole. Of ERP service providers, SAP is a leader with its Business Software Solutions pack. Companies shell out absurdly large amounts of money given the advantages of customization that SAP brings to any given industry. This then get passed onto consumers as the economic food chain states, costing people an arm and a leg for seemingly marginal gain. You have to ask yourself: is there a better solution?

Open Source: software that has it’s source code freely available to anyone on the Internet to download. You can usually find open source counterparts to proprietary software packages for free or next to nothing. But, how does it measure in terms of support, bug fixes, security, quality of code, product stability, etc? These are valid questions which you should consider.

The answer?… It depends. When comparing support and bug fixes, there is some open source software that is far better than its closed source counterparts, and others that fall short. When comparing quality of code, the answer again is– it depends. At least that’s what Coverity Senior Director of Product Development said in 2013, after Coverity launched an Open Source Report which detailed the analysis of 750 million lines of open source software code. Coverity’s Open Source report also analyzed code from over 700 open source C/C++ projects, in addition to anonymous enterprise projects. Their key findings suggest open source software outpaces proprietary in terms of code quality. Point being, marginal improvements in terms of quality and service offered by proprietary ERP’s aren’t worth the exorbitant price differentiation.

Proprietary ERM Software Alternatives

If your company needs an office suite, why give MSFT your hard earned money, when Sun’s Open Office will do the job fine? Both French and Norwegian governments already use it. If you need VBA for those extraordinarily fun financial models, Open Office has BASIC. It’s essentially the same thing, albeit a few commands that any VBA programmer can pick up in a heartbeat.

The same goes for ERP. While SAP is a global magnate that can be customized to meet your specific needs, so can its commercial open source counterparts, namely Sugar CRM, xTuple, and Compiere (oh, and Salesforce of course). These alternatives offer the same advantages without shelling out on average $4,000 per user. Here’s the thing, ERP implementation is resource intensive, and no matter where you look it’s not cheap. But with open source you’re not putting up front the types of fees associated with a proprietary ERP system. Not to mention, with proprietary ERM software a SME may end up having to pay additional licensing or customization fees.

This cost-benefit analysis even extends to entertainment software, such as OGRE a 3D open source graphics engine and physics simulator, and can even be seen in OS’ like OS X that are in part free BSD. Furthermore, the more people that use open source, the more money will be funneled towards its innovation, leading to a win-win for pretty much everyone. And if I remember correctly from business school, we all want to achieve win-win situations.

So why the post?

Simply put, many startups, SME’s and even mature organizations often forego open source for proprietary software. This is because they lack the knowledge of what it can offer them and the savings that it can bring. According to a 2016 Forrester Research Survey, there is still slow adoption of open-source software, primarily due to safety concerns. And many software developers often dismiss the importance of open source products in enterprises for just that reason. This is pretty ironic considering that even the most proprietary software includes open-source technology inside. But let’s be reasonable, people. Open source is the way to go, in today’s fast-changing world businesses need to be flexible and adhere to a tight budget.

I’m curious, however, to hear your thoughts. Drop a line and if you like this article, be sure to sign up to our newsletter where you’ll receive thoughtful news on tech once a week.

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